SP Futures Daily Chart

The Federal Reserve and the Administration seem intent on creating another bubble, or rather reflating an old one in US dollar heavy financial assets, in order to prolong the mother of all bubbles, the credit in US dollars bubble.

They are doing it selectively, with the banks carefully apportioning the excess liquidity into financial assets held by a relatively fewer amount of Americans who own stocks, while savers are heavily penalized.

When the credit bubble begins to totter things will become quite chaotic, and the panic this next time around may be terrific, dwarfing that so-easily forgotten repentance and regret of 2007-8. More than panic: hysteria.

I think it is now too late for a real reform. The Democrats have squandered their mandate from the people, and the Republicans are crony capitalists marching in lock step with the Banks, who seem to be in control once again. But I could be mistaken, and would be glad if I am.

When the US dollar and economy roll over it will make quite a wave that will swamp many boats. But these things take time. Once they start to happen, it moves slowly at first, but then gains a momentum and becomes almost unstoppable.

I am not quite sure how much water the USS Leviathan has already taken on, and how big the hole might be. But I firmly believe that the iceberg has been struck, the damage done, and the process has begun. The lifeboats are being quietly provisioned and reservations taken for the officers and crew, and the upper decks.

Again, these things take time, and there is always hope until the end. But there is less and less that can be done as the process continues to unfold, with no serious repairs, and only distractions for the passengers, and encouragingly false announcements, from the bridge.



Don't feed the sharks. Wait for this to break support and trend.

The Financial Crisis: Are We All Responsible?

"Whoever commits a fraud is guilty not only of the particular injury to him who he deceives, but of the diminution of that confidence which constitutes not only the ease, but the very existence of a society." Samuel Johnson

As the hearings and scandals progress, and the revelations and charges start to cut closer to the heart of the credit swindles, inevitably there will be a movement to say, "We are all responsible. Let's allow bygones to be bygones, it was all a misunderstanding. Let's move on to something new. Justice is not important, and cannot be done."

There will be long accountings of how the problems arose, and how changes in the banking laws, broker deregulation, and the erosion of elite privileges compelled the Wall Street banks to take more and greater risks, to violate unspoken understandings about customer relationships, to take great risks, to bend the laws, to use money and influence to suborn perjury and the breaking of oaths, and to generally undermine the fabric of government.

There will be long analyses that suggest that trust has been lost, the trust that binds the social and financial interactions of people. And there will be an effort to regain that trust, to promise change and reform, and of course, justice.

As for justice they will say, but aren't we all responsible? Didn't we all believe the promise that 'greed is good?'

No.

The overwhelming majority of people are hard working, honest in their dealings, more concerned with raising families than ruling others, if anything distracted by their day to day problems. Long suffering, patient to a fault, too willing to the give the Wall Street bankers the benefit of the doubt for the very reason of their own good natures. They could not imagine themselves doing the things of which these men stand accused, so they cannot believe that others would so willingly lie and deceive, cheat and steal, attack the very heart of the nation, while wrapping themselves in a flag of hypocrisy, for a few more dollars that they can hardly need or even personally spend.

And why? Because it feeds their sickened hearts, their pathological egos, and the need to make others suffer loss for their own gains. It sets them apart from a humanity which they hold in contempt enmingled with a nagging self-hate, makes them feel superior and worthwhile, and at the extreme even as gods among men.

So when the fresh public relations spin and propaganda from Wall Street and the financial sector's demimonde starts this week, and seeks to confuse the issues and distort the true nature of the fraud, recall who profited and who lost, who was caught with their hands deep in the pockets of the many, and even now stand arrogantly unrepentant with the ongoing misery of others to their account. And who stood idly by while charged by sworn oaths with protecting the innocent, the unsuspecting many, from the predatory, lawless few.

"When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle." Edmund Burke

Or, in the words of William K. Black and Elliot Spitzer in their essay Questions on the Goldman Scandal at New Deal 2.0:

"We applaud the SEC lawsuit, but it will not solve the problem. Unless our financial system is reformed to put adequate protections and checks and balances in place, we can expect this kind of fraud to continue. Financial executives will continue to take risks they do not understand. Those who control the flow of capital will continue to churn out profits with socially disastrous consequences."

The banks must be restrained, the financial system reformed, the economy brought bank into balance, and justice done though the mighty fall, before there can be any sustained recovery.

Regulations Alone Are Never Enough, But Here's How They Can Easily Be Made Pointless

Mr. Obama's speech at the Cooper Union today was remarkably unsatisfying. It seemed to be given from weakness, and almost obsequious as the American President politely asked his largest campaign contributors to please stop flouting the law, defrauding the people and their customers, and spending millions per day lobbying the Congress to buy changes in the reform legislation to provide them with the 'right regulators' of their choice and convenient loopholes to render it ineffective.

The reform making its way through the Congress is unlikely to be effective given the process in place, despite the political kabuki dance being conducted by the Congress and the Banks.

The solution is to put simple and effective regulations in the hand of stronger, independent, ad highly capable regulators to bear on the financial services industry, and to understand that the regulations must evolve with a dynamicly evolving business. The idea that you can erect some impregnable and unchanging Maginot line against bank fraud is laughable, a farce.

As William K. Black disclosed in his testimony the other day, the regulators always had the power to shut down the frauds, and to resolve the financial crisis without having to give away billions. They lacked the will, and the motivation.

You want to wipe that smirk off Lloyd Blankfein's face? Nominate Eliot Spitzer or Elizabeth Warren to be the head of the SEC, or the CFTC, and provide them with a adequate budget and a staff of financial experts and a few experienced prosectors.

Even with strong regulations, unless you have capable and motivated regulators, there are always ways to evade the rules, especially if they are complex and provide exceptions. The simpler they are, the stronger the regulations will be, provided they are flexible enough to be amended and expanded efficiently to match the changing and dynamic nature of the industry that they are overseeing.

This is not that difficult, and these jokers are not that smart, although part of their con is to paint themselves as the smartest, the best, and practically unstoppable.

The root of the US financial crisis is always and everywhere regulatory capture, political cronyism, and fraud. It really is that simple.

Barack Obama should to listen to a speech by Nick Clegg of the UK Liberal Democratic Party to hear what a genuine reformer sounds like. Today he sounded like a servant, but not for the public.

Marketwatch
Meet the New Goldman Sachs Derivatives Business
By David Callaway
April 22, 2010

"...So the version making its way to the Senate floor Wednesday included a host of exemptions for non-bank companies who use derivatives to hedge against quick movements in prices for resources they need. These include airlines, manufacturers, other trading corporations, and pension funds - entities like Enron, for example, or the Orange County, Ca., retirement fund - two infamous financial wizards.

So firms like Goldman, Morgan Stanley, or J.P. Morgan Chase Co. would be able to register as other entities - airlines, manufacturers, pension consultants -- and continue to trade derivatives to their hearts content.

Sounds silly, until you realize that's just what Goldman and a number of other banks did almost two decades ago to enable them to trade widely in commodities index futures. In 1981, Goldman got itself classified as a "hedger," such as a farmer or food producer, so it could trade commodities without fear of limits put on pure speculators.

Part of the fallout from that was the disastrous run-up in food and commodities prices we saw in 2009, caused by speculators, which finally forced the Commodities Futures Trading Commission to take a look at these special exemptions. See story on Goldman futures trading exemptions.

This is where the battle over the derivatives bill lies in the next several days, and where Wall Street will concentrate its efforts. The more exemptions granted; the larger the loopholes and trading opportunities. These are not stupid people, by the way.

Another provision would require the $60 trillion foreign exchange swaps industry to be overseen by the CFTC, which is the same regulator that earlier this week was considering whether traders could make markets in Hollywood movie futures, but neither of those ideas will fly - especially in foreign currency markets.

To make its derivatives regulation work, and have teeth, Congress and the Obama Administration must resist all exemptions on derivatives trading. They must instead focus on forging a global alliance in the G-20 this weekend in Washington to stand behind the creation of a transparent market in derivatives trading through clearing houses and exchanges.

Doing this would lead to cheaper trading for customers and make it easier for global regulators to supervise the creation of new products. Importantly, it would also allow the big banks to continue to participate in what is in fact a very lucrative and vital business for the global economy, not just to hedgers, but to those seeking loans to rebuild their companies, industries, or countries. Like it or not, banks are the primary lenders and they need to be allowed to do business.

Whether this in fact will happen in Washington, or whether Congress will once again descend into a chaos of partisan bickering and blind and reactionary rule making, is anybody's guess. Goldman is almost certainly betting on both outcomes.

Unadjusted Producer Price Index

One picture is worth 1000 words.

World of Wall Street - Unadjusted Year Over Year: Producer Price Index Up 6.1%

William K. Black's Testimony to the Congress on Lehman's fraud

The recent US financial crisis is always and everywhere founded in regulatory capture, dissembling, influence peddling, and fraud.

'Third Party' Liberal Democrats Jump Into Contention in British Polls

British elections became a 'three way' race as Liberal Democrat Nick Clegg electrified audiences in the recent televised debate.

UK Election

"Many will have learned more about the three main parties' policies in 90 minutes than they had ever known before. In an election in which trust and integrity are likely to prove crucial all will have had the chance to contrast close up and under fire the personal mettle of Messrs. Cameron, Clegg and Brown."

This speaks volumes about what is likely to become a trend and perhaps a preview of the US November elections in which incumbents drop and give way to a more independent and third party candidates.

Liberal Democrat leader Nick Clegg speaks in a recent press conference about banking reform and the Goldman Sachs scandal in the States.



I am informed by a UK reader that this poll understates the push the Liberal Democrats have made, and that in other polls they trail the Tories by only two points, or are at par.

US Said to Ready Special Armed Forces Unit For Domestic Deployment in Case of Disaster or Civil Unrest

Although the National Guard has been used in the past to deal with protests, they were called by the state governors and were not acting at the direction of the Federal government.

"The Posse Comitatus Act is a United States federal law (18 U.S.C. § 1385) passed on June 18, 1878, after the end of Reconstruction, with the intention (in concert with the Insurrection Act of 1807) of substantially limiting the powers of the federal government to use the military for law enforcement. The Act prohibits most members of the federal uniformed services (today the Army, Navy, Air Force, and State National Guard forces when such are called into federal service) from exercising nominally state law enforcement, police, or peace officer powers that maintain "law and order" on non-federal property (states and their counties and municipal divisions) within the United States.

The statute generally prohibits federal military personnel and units of the National Guard under federal authority from acting in a law enforcement capacity within the United States, except where expressly authorized by the Constitution or Congress. The Coast Guard is exempt from the Act during peacetime."

I wonder if this is true, and if the Obama Administration intends to deploy Federal troops, or declare martial law, this summer prior to the elections. I am not familiar with the Newark Examiner.

It does not seem consistent with the law, because this is a regular army regiment. The provisions for their deployment passed during the Bush Administration had been repealed, setting the use of troops back to the conditions of Insurrection as I recall.

I believe that is the premise by which the government directed MacArthur to lead regular army troops to dispel the WWI veterans from the Capitol in the last Great Depression.

Even in the race riots of the 1960's which were in many cases armed and dangerous, the National Guard was deployed at the direction of the state's governor. I am not aware of any other legal precedents or rules on this. Perhaps someone else can oblige.

P.S. A reader informs me that this news report is from a 'conservative' news source that has a variety of virtual locations in different states. The size of this military unit is also said to be greatly overestimated at 80,000. I suspect that this might be the case, and that the purpose of this news piece may be to incite misplaced concerns. But it does serve to bring up the issue, and to make people aware that posse commitatus has been considered a 'liberty' of the land for over a hundred years. If it is ignored, and the law is broken, then the American people will speak out against it again, as is their duty and their obligation.

Newark Examiner
Special army unit ready to be deployed on American soil just before Nov. elections
April 21, 2010

In October of this year, one month prior to the November midterm elections, a special army unit known as 'Consequence Management Response Force' will be ready for deployment on American soil if so ordered by the President.

The special force, which is the new name being given to the 1st Brigade Combat Team of the 3rd Infantry, has been training at Fort Stewart, Georgia and is composed of 80,000 troops.

According to the Army Times,

"They may be called upon to help with civil unrest and crowd control or to deal
with potentially horrific scenarios such as massive poisoning and chaos in
response to a chemical, biological, radiological, nuclear or high-yield
explosive, or CBRNE, attack."

The key phrase is 'may be called upon to help with civil unrest.'

This afternoon a local radio talk show host reported that he had been in contact with a member of the military. This military source stated that the armed forces have been alerted to the strong possibility that civil unrest may occur in the United States this summer, prior to the midterm elections of 2010.

The source described this as 'our long, hot summer of discontent' that could be eerily reminiscent of the summer of 1968 when riots broke out in many of our largest cities.

However, the summer of 2010 could well be much worse due to the players involved. In 1968 the major players were war protesters. This time, the outrage simmering beneath the surface of American society involves a broad cross-section of the heartland, and most of them are heavily armed...

Read the rest here.

93% Of Commodity Specs Believe that Gold Price Will Decline; US Financial Model Is a Threatened Specie

Of course that pun in the title is intended. How could you even ask?

Mom and Pop America, unlike their Asian counterparts, and most speculators apparently, do not favor the precious metals like gold.

They might be right. But sometimes it is safest to be positioned comfortably far from the maddening (pun intended as in 'frenzied' and 'annoying') crowd.

For me that entails being on a short term hedged trade, long stuff and short fluff.

The US financial sector, as represented by the bloated banks, are overvalued based on a business model that relies on gaming the system, routinely defrauding their customers, adding little value to the global economy except for themselves, and feeding off the wealth creation and the labor of the many. That seems to be coming to an end, perhaps not tomorrow, but as time goes by.

If stocks take a serious tumble in the US we'll know which way the wind is blowing. If gold holds its ground, we will have an indication that it is ready for the next leg up, because the drop in stocks is based on a disgorgement of assets which have lost their appeal and confidence because of the repeated, increasingly reckless, and virulent frauds of the American oligarchs.

Commodity Online
Poll: 93% of Investors Believe That Gold will Fall
By Rutam Vora
21 April 2010, 10:49 a.m. EST

(Commodity Online) -- At a time when gold prices reeled under pressure, for a sustained period after hitting their all-time high in December 2009, the perception towards the yellow metal seems to have reversed with investors hinting at weakening of gold prices in the near future and strengthening of other investment avenues...

In an online opinion poll conducted by Commodity Online, a majority of the respondents have hinted at a possible fall in gold prices in the near future, and better earning opportunities will come knocking on the door.

In an online poll of a sample size of 21,600 respondents selected from across the globe, 93% or 20,100 of the total sample size had opined that there would be a fall in gold prices due to a recent upbeat mood in the global equity markets, while only 1,400 respondents contradicted the stand, 0.46% did not comment on either side. This showed that most of the respondents believed that there would be a fall in gold prices in the near future due to a recovery in global equity markets.

However, with regard to the other metals being an investment destination, most of the respondents maintained a view that they (base metals) can potentially become alternative investment instruments. As many as 64.35% of respondents considered base metals as a potential investment instrument but of them, 53% still chose gold as a preferred investment instrument compared to base metals, while 46.76% preferred base metals to gold....

Similarly, of the total respondents as many as 53.1% believed that the US dollar would replace gold from its status of 'safe haven.' Looking at the recovery of the US economy from the nightmarish recession which had started from the US and hit the world economy in 2008, the dollar was found gathering steam once again. However, 46.8% of the respondents contradicted the view and maintained their skepticism towards the dollar and put gold to their preferred investment mode...

US Unveils an Even Newer New $100 Bill

The new $100 US bill will go into circulation on February 10, 2011.

It is being put forward as a new form of currency with stronger anti-counterfeiting measures to help stem the tide of non-official monetary expansion.

I suspect at some point it will facilitate a 'recall' of the old notes, as a means of combating cash and carry businesses and money laundering. It will also seek to unhinge cash hoarding overseas tied to the drug trade.

It has not been announced if these bills will be carrying an expiration date to insure freshness.

Secretary of Treasury Tim Geithner will be auctioning the crayons he used to sign his name to the bill on eBay to help defray the national debt. His handle is 2RB-O-TimEE.

New Money Homepage

Wall Street Journal
U.S. Unveils New $100 Bill
By
DARRELL A. HUGHES
April 21, 2010

WASHINGTON—Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke unveiled a new $100 bill equipped with two new security features.

The bill will go into circulation Feb. 10, 2011.

The Fed, along with the Treasury Department, the Bureau of Engraving and Printing and the U.S. Secret Service, "continuously monitor the counterfeiting threats" for each denomination and redesign decisions are made based on those threats, Mr. Bernanke said.

"This job has become more complex in recent years as technology advances and U.S. dollar flows expand and increase," he added.

The bill—the highest denomination of all U.S. notes—circulates widely around the world, with circulation in the past 25 years growing to $890 billion from $180 billion.

About two-thirds of all $100 notes circulate outside the U.S.; Mr. Bernanke said the agencies must ensure people around the world are aware of the design change. Over the next several months, officials at the agencies will work to educate cash handlers,
consumers and others about the design and explain how to use its security features.

The 6.5 billion or so $100 notes in circulation now will remain legal tender, Mr. Bernanke said.

The new bill's security features include a blue 3-D Security Ribbon on the front of the note that contains images of bells and 100s, which move and change from one to the other as you tilt the note, according to joint release from the agencies.

Another security feature is the "Bell in the Inkwell" image that changes color from copper to green when the note is tilted, an effect that makes it appear and disappear within the inkwell. (For more on the redesigned note and its features, visit www.newmoney.gov.)

"As with previous U.S. currency redesigns, this note incorporates the best technology available to ensure we're staying ahead of counterfeiters," Mr. Geithner said.

The new design for the $100 note retains three effective security features from the previous design: the portrait watermark of Benjamin Franklin, the security thread, and the color-shifting numeral 100.